UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

[X]   Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
      of 1934

                 For the quarterly period ended March 31, 2002

[_]   Transition report under Section 13 or 15(d) of the Securities Exchange Act
      of 1934

                  For the transition period from _____ to _____

                        Commission file number 000-26095

                              ENVIROKARE TECH, INC.
        (Exact name of small business issuer as specified in its charter)

              Nevada                                        88-0412549
 (State or other jurisdiction of                        (I.R.S. Employer
  incorporation or organization)                        Identification No.)

             2470 Chandler Avenue, Suite 5, Las Vegas, Nevada 89120
                    (Address of principal executive offices)

                                 (702) 262-1999
                           (Issuer's telephone number)

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the issuer filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes [_]  No [_]

                                 NOT APPLICABLE

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: The total number of shares of Common
Stock, par value $.001 per share, outstanding as of April 22, 2002, was
26,556,144.

Transitional Small Business Disclosure Format (Check one): Yes [_] No [X]

<PAGE>

                                TABLE OF CONTENTS

Part I -- FINANCIAL INFORMATION

Item 1.  Financial Statements..................................................1

              Accountant's Review Report.......................................2

              Consolidated Balance Sheets......................................3

              Consolidated Statements of Operations and Comprehensive Loss.....4

              Consolidated Statement of Stockholders' Equity...................5

              Consolidated Statements of Cash Flows............................7

         Notes to the Consolidated Financial Statements........................8

Item 2.  Plan of Operation....................................................21

Part II -- OTHER INFORMATION

Item 1.  Legal Proceedings....................................................31

Item 2.  Changes in Securities................................................31

Item 3.  Defaults Upon Senior Securities......................................31

Item 4.  Submission of Matters to a Vote of Security Holders..................31

Item 5   Other Information....................................................31

Item 6.  Exhibits and Reports on Form 8-K.....................................32

<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                              ENVIROKARE TECH, INC.
                              Financial Statements
                                 March 31, 2002

                              WILLIAMS & WEBSTER PS

                          Certified Public Accountants
                        Bank of America Financial Center
                          W. 601 Riverside, Suite 1940
                                Spokane, WA 99201
                                 (509) 838-5111


                                       1
<PAGE>

Board of Directors
Envirokare Tech, Inc.
2470 Chandler, Suite 5
Las Vegas, Nevada  89120

                           ACCOUNTANT'S REVIEW REPORT

We have reviewed the accompanying consolidated balance sheet of Envirokare Tech,
Inc.  (a  development  stage  company)  as of March  31,  2002  and the  related
consolidated statements of operations,  cash flows, and stockholders' equity for
the three months ended March 31, 2002 and 2001, and for the period from June 15,
1998  (inception)  through March 31, 2002.  These  financial  statements are the
responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical  procedures to financial
data and making  inquiries of persons  responsible  for financial and accounting
matters.  It is  substantially  less in scope than an audit in  accordance  with
auditing  standards  generally  accepted in the United  States of  America,  the
objective  of which is the  expression  of an opinion  regarding  the  financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the  accompanying  financial  statements  in order  for them to be in
conformity with accounting principles generally accepted in the United States of
America.

The financial statements for the year ended December 31, 2001 were audited by us
and we expressed an unqualified opinion on them in our report dated February 11,
2002, but we have not performed any auditing procedures since that date.

As discussed in Note 2, the Company has been in the development  stage since its
inception and has no revenues.  The Company's  continued  viability is dependent
upon the Company's  ability to meet its future  financing  requirements  and the
success of future  operations.  These factors raise  substantial doubt about the
Company's ability to continue as a going concern.  Management's  plans regarding
those matters are  described in Note 2. The financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.


Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
April 17, 2002


                                       2
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                        March 31
                                                                           2002         December 31,
                                                                       (unaudited)          2001
                                                                       -----------      ------------
<S>                                                                    <C>              <C>
ASSETS
    CURRENT ASSETS
        Cash                                                           $    11,019      $   118,927
                                                                       -----------      -----------
             TOTAL CURRENT ASSETS                                           11,019          118,927
                                                                       -----------      -----------

    PROPERTY AND EQUIPMENT
        Furniture and fixtures                                               1,893            1,893
        Office equipment                                                     7,999            7,999
        Molds                                                               51,000           43,000
             Less accumulated depreciation                                  (5,266)          (4,829)
                                                                       -----------      -----------
             TOTAL PROPERTY AND EQUIPMENT                                   55,626           48,063
                                                                       -----------      -----------

    OTHER ASSETS
        Deposits and retainers                                              22,004           22,223
        License agreement                                                  525,000          525,000
        Patent acquisition costs and technology rights                   1,968,459        1,968,459
                                                                       -----------      -----------
             TOTAL OTHER ASSETS                                          2,515,463        2,515,682
                                                                       -----------      -----------

        TOTAL ASSETS                                                   $ 2,582,108      $ 2,682,672
                                                                       ===========      ===========

LIABILITIES & STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES
        Accounts payable                                               $    89,214      $   100,759
        Accounts payable - related party                                        --           20,921
        Notes payable                                                       61,965           61,965
        Accrued interest                                                    20,735           19,186
                                                                       -----------      -----------
             TOTAL CURRENT LIABILITIES                                     171,914          202,831
                                                                       -----------      -----------

    LONG-TERM LIABILITIES
        Notes payable to stockholders                                    1,025,000        1,025,000
        Accrued interest to stockholders                                    68,489           30,051
             TOTAL LONG-TERM LIABILITIES                                 1,093,489        1,055,051
                                                                       -----------      -----------

    COMMITMENTS AND CONTINGENCIES                                               --               --
                                                                       -----------      -----------

    STOCKHOLDERS' EQUITY
        Convertible preferred stock, 10,000,000 shares authorized,
             $.001 par value; 0 shares issued and outstanding                   --               --
                                                                       -----------      -----------
        Common stock, 200,000,000 shares authorized,
             $.001 par value; 25,556,144 and 24,356,144 shares
             issued and outstanding, respectively                           25,556           24,356
        Additional paid-in capital                                       3,509,540        3,320,790
        Stock options and warrants                                         824,865          840,642
        Accumulated deficit during development stage                    (3,043,256)      (2,760,998)
                                                                       -----------      -----------
        TOTAL STOCKHOLDERS' EQUITY                                       1,316,705        1,424,790
                                                                       -----------      -----------

        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                     $ 2,582,108      $ 2,682,672
                                                                       ===========      ===========
</TABLE>

             See accompanying notes and accountant's review report.


                                       3
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                   Period from
                                                                                  June 15,1998
                                              Three Months      Three Months     (Inception) to
                                            Ended March 31,   Ended March 31,       March 31,
                                                  2002             2001               2002
                                              (unaudited)      (unaudited)         (unaudited)
                                            ---------------   ---------------    --------------
<S>                                          <C>               <C>                 <C>
REVENUES                                     $         --      $         --        $        --
                                             ------------      ------------        -----------
EXPENSES
      Consulting fees - related parties            18,000            56,500            660,455
      Other consulting fees                       171,173            41,000            910,838
      Financing costs                                  --                --            219,642
      Rent                                          6,554            10,400             56,562
      General and administrative                   23,110            28,521            371,174
      Depreciation                                    437               404              5,266
      Professional fees                            22,218            64,014            402,930
      Research and development                         --                --            180,938
      Wages, salaries, and payroll taxes               --                --            131,879
                                             ------------      ------------        -----------
           TOTAL EXPENSES                         241,492           200,839          2,939,684
                                             ------------      ------------        -----------

LOSS FROM OPERATIONS                             (241,492)         (200,839)        (2,939,684)

OTHER EXPENSE
      Interest expense                            (40,766)           (1,671)          (103,572)
                                             ------------      ------------        -----------
           TOTAL OTHER EXPENSE                    (40,766)           (1,671)          (103,572)
                                             ------------      ------------        -----------

LOSS BEFORE PROVISION FOR INCOME TAXES           (282,258)         (202,510)        (3,043,256)

PROVISION FOR INCOME TAXES                             --                --                 --
                                             ------------      ------------        -----------

NET LOSS                                     $   (282,258)     $   (202,510)       $(3,043,256)
                                             ============      ============        ===========

      BASIC AND DILUTED NET LOSS
           PER COMMON SHARE                  $      (0.01)     $      (0.01)
                                             ============      ============

      WEIGHTED AVERAGE NUMBER
           OF BASIC AND DILUTED COMMON
           STOCK SHARES OUTSTANDING            24,714,741        13,889,478
                                             ============      ============
</TABLE>

             See accompanying notes and accountant's review report.


                                       4
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                               Preferred Stock                 Common Stock
                                                           -----------------------       ------------------------       Additional
                                                             Number                        Number                        Paid-in
                                                           of Shares       Amount        of Shares        Amount         Capital
                                                           ---------      --------       ----------      --------      -----------
<S>                                                          <C>          <C>            <C>             <C>           <C>
Issuance of common stock in June, 1998
     for cash at $0.001 per share                                 --      $     --       10,000,000      $ 10,000      $        --

Net loss for period ended December 31, 1998                       --            --               --            --               --
                                                           ---------      --------       ----------      --------      -----------

Balance, December 31, 1998                                        --            --       10,000,000        10,000               --

Issuance of common stock at an average of $0.45
     per share for cash                                           --            --          746,140           746          334,053

Issuance of  preferred stock at $0.50 per share
     for cash                                                500,000           500               --            --          249,500

Issuance of stock options for services                            --            --               --            --               --

Contribution of capital by shareholders in the form
     of foregone payment of accounts payable                      --            --               --            --            1,847

Net loss for year ended December 31, 1999                         --            --               --            --               --

Foreign currency translation loss                                 --            --               --            --               --
                                                           ---------      --------       ----------      --------      -----------

Balance, December 31, 1999                                   500,000           500       10,746,140        10,746          585,400

Cash received for subscriptions receivable                        --            --               --            --               --

Issuance of common stock at an average of $0.45
     per share for cash                                           --            --          543,338           543          356,957

Expiration of stock options                                       --            --               --            --          120,000

Issuance of stock options for services                            --            --               --            --               --

Stock options exercised at $0.58 per share                        --            --          100,000           100           81,400

Stock issued for acquisition of Electroship Acquisition
     Corporation, a wholly-owned subsidiary, at
     $0.77 per share                                              --            --        2,500,000         2,500        1,922,500

Net loss for the year ended December 31, 2000                     --            --               --            --               --

Foreign currency translation loss                                 --            --               --            --               --
                                                           ---------      --------       ----------      --------      -----------

Balance, December 31, 2000                                   500,000           500       13,889,478        13,889        3,066,257

Expiration of stock options                                       --            --               --            --          132,000

Issuance of stock options for services                            --            --               --            --               --

Issuance of common stock at $0.14 per share for cash
     with attached warrants at $0.06 per share for cash           --            --        1,000,000         1,000          139,000

Conversion of preferred stock into common stock             (500,000)         (500)      10,000,000        10,000           (9,500)

Common stock repurchase at $0.02 per share                        --            --         (533,334)         (533)          (6,967)

Warrants issued for financing expense                             --            --               --            --               --

Other comprehensive income                                        --            --               --            --               --

Net loss for the year ended December 31, 2001                     --            --               --            --               --
                                                           ---------      --------       ----------      --------      -----------

Balance, December 31, 2001                                        --      $     --       24,356,144      $ 24,356      $ 3,320,790

<CAPTION>

                                                         Stock Options                                    Other            Total
                                                             and        Subscriptions   Accumulated   Comprehensive    Stockholders'
                                                           Warrants       Receivable      Deficit         Income          Equity
                                                         -------------  -------------   -----------   -------------    -------------
<S>                                                        <C>            <C>           <C>            <C>              <C>
Issuance of common stock in June, 1998
     for cash at $0.001 per share                          $      --      $      --     $        --    $        --      $    10,000

Net loss for period ended December 31, 1998                       --             --         (34,427)            --          (34,427)
                                                           ---------      ---------     -----------    -----------      -----------

Balance, December 31, 1998                                        --             --         (34,427)            --          (24,427)

Issuance of common stock at an average of $0.45
     per share for cash                                           --       (105,000)             --             --          229,799

Issuance of  preferred stock at $0.50 per share
     for cash                                                     --             --              --             --          250,000

Issuance of stock options for services                       552,000             --              --             --          552,000

Contribution of capital by shareholders in the form
     of foregone payment of accounts payable                      --             --              --             --            1,847

Net loss for year ended December 31, 1999                         --             --        (893,173)            --         (893,173)

Foreign currency translation loss                                 --             --              --         (1,202)          (1,202)
                                                           ---------      ---------     -----------    -----------      -----------

Balance, December 31, 1999                                   552,000       (105,000)       (927,600)        (1,202)         114,844

Cash received for subscriptions receivable                        --        105,000              --             --          105,000

Issuance of common stock at an average of $0.45
     per share for cash                                           --             --              --             --          357,500

Expiration of stock options                                 (120,000)            --              --             --               --

Issuance of stock options for services                       121,000             --              --             --          121,000

Stock options exercised at $0.58 per share                   (24,000)            --              --             --           57,500

Stock issued for acquisition of Electroship Acquisition
     Corporation, a wholly-owned subsidiary, at
     $0.77 per share                                              --             --              --             --        1,925,000

Net loss for the year ended December 31, 2000                     --             --        (611,329)            --         (611,329)

Foreign currency translation loss                                 --             --              --         (2,846)          (2,846)
                                                           ---------      ---------     -----------    -----------      -----------

Balance, December 31, 2000                                   529,000             --      (1,538,929)        (4,048)       2,066,669

Expiration of stock options                                 (132,000)            --              --             --               --

Issuance of stock options for services                       164,000             --              --             --          164,000

Issuance of common stock at $0.14 per share for cash
     with attached warrants at $0.06 per share for cash       60,000             --              --             --          200,000

Conversion of preferred stock into common stock                   --             --              --             --               --

Common stock repurchase at $0.02 per share                        --             --              --             --           (7,500)

Warrants issued for financing expense                        219,642             --              --             --          219,642

Other comprehensive income                                        --             --              --          4,048            4,048

Net loss for the year ended December 31, 2001                     --             --      (1,222,069)                     (1,222,069)
                                                           ---------      ---------     -----------    -----------      -----------

Balance, December 31, 2001                                 $ 840,642      $      --     $(2,760,998)   $        --      $ 1,424,790
</TABLE>

             See accompanying notes and accountant's review report.


                                       5
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                      Preferred Stock             Common Stock
                                                                   ---------------------     ----------------------     Additional
                                                                    Number                     Number                     Paid-in
                                                                   of Shares      Amount     of Shares       Amount       Capital
                                                                   ---------     -------     ---------      -------     ----------
<S>                                                                       <C>    <C>         <C>            <C>         <C>
Balance, December 31, 2001                                                --     $    --     24,356,144     $24,356     $3,320,790

Expiration of stock options                                               --          --             --          --         59,000

Issuance of stock for services at $0.16 per share                         --          --        700,000         700        111,300

Issuance of common stock at $0.04 per share for cash
     with attached warrants at $0.06 per share for cash                   --          --        500,000         500         18,450

Issuance of stock options for services                                    --          --             --          --             --

Net loss for the three months ended March 31, 2002
     (unaudited)                                                          --          --             --          --             --
                                                                    --------     -------     ----------     -------     ----------
Balance, March 31, 2002                                                   --     $    --     25,556,144     $25,556     $3,509,540
                                                                    ========     =======     ==========     =======     ==========

<CAPTION>

                                                            Stock Options                                  Other          Total
                                                                 and       Subscriptions  Accumulated  Comprehensive  Stockholders'
                                                              Warrants       Receivable     Deficit        Income        Equity
                                                            -------------  -------------  -----------  -------------  -------------
<S>                                                           <C>              <C>        <C>             <C>         <C>
Balance, December 31, 2001                                    $ 840,642        $   --     $(2,760,998)    $    --     $ 1,424,790

Expiration of stock options                                     (59,000)           --              --          --              --

Issuance of stock for services at $0.16 per share                    --            --              --          --         112,000

Issuance of common stock at $0.04 per share for cash
     with attached warrants at $0.06 per share for cash          31,050            --              --          --          50,000

Issuance of stock options for services                           12,173            --              --          --          12,173

Net loss for the three months ended March 31, 2002
     (unaudited)                                                     --            --        (282,258)         --        (282,258)
                                                              ---------        ------     -----------     -------     -----------
Balance, March 31, 2002                                       $ 824,865        $   --     $(3,043,256)    $    --     $ 1,316,705
                                                              =========        ======     ===========     =======     ===========
</TABLE>

             See accompanying notes and accountant's review report.


                                       6
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                             Period from
                                                                                                            June 15,1998
                                                                      Three Months       Three Months      (Inception) to
                                                                     Ended March 31,    Ended March 31,       March 31,
                                                                          2002               2001               2002
                                                                      (unaudited)        (unaudited)         (unaudited)
                                                                     ---------------    ---------------    --------------
<S>                                                                    <C>                 <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net loss                                                         $(282,258)          $(202,510)        $(3,043,256)
      Adjustments to reconcile net loss
           to net cash used by operating activities:
      Depreciation                                                           437                 404               5,266
      Stock options issued for consulting fees                            12,173                  --             849,173
      Stock issued for consulting fees                                   112,000                  --             112,000
      Warrants issued for financing expense                                   --                  --             219,642
      Consulting fees due to related party applied to receivable              --                  --              15,000
      Decrease (increase)  in prepaid expenses and deposits                  219             (33,413)            (22,004)
      Increase (decrease) in accounts payable                            (32,466)             41,951              89,214
      Increase in accrued interest receivable                                 --                (105)                 --
      Increase in accrued interest payable                                39,987               1,528              89,224
                                                                       ---------           ---------         -----------
      Net cash used by operating activities                             (149,908)           (192,145)         (1,685,741)
                                                                       ---------           ---------         -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Loan to related party                                                   --                  --             (15,000)
      (Purchase) write-off of molds                                       (8,000)                 --             (51,000)
      Payments of license agreement                                           --                  --            (525,000)
      Patent costs                                                            --                  --             (10,129)
      Purchase of equipment                                                   --              (1,338)             (8,045)
                                                                       ---------           ---------         -----------
      Net cash used in investing activities                               (8,000)             (1,338)           (609,174)
                                                                       ---------           ---------         -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from sale of preferred stock                                   --                  --             250,000
      Proceeds from sale of common stock                                  50,000                  --           1,009,799
      Repurchase of common stock                                              --                  --              (7,500)
      Proceeds from deposit for stock                                         --             156,000                  --
      Proceeds from issuance of notes payable to related parties              --              50,000           1,053,635
                                                                       ---------           ---------         -----------
      Net cash provided by financing activities                           50,000             206,000           2,305,934
                                                                       ---------           ---------         -----------

Increase (decrease) in cash                                             (107,908)             12,517              11,019

Cash, beginning of period                                                118,927              11,362                  --
                                                                       ---------           ---------         -----------

Cash, end of period                                                    $  11,019           $  23,879         $    11,019
                                                                       =========           =========         ===========

SUPPLEMENTAL CASH FLOW INFORMATION:
      Interest paid                                                    $   1,576           $      --         $    14,989
                                                                       =========           =========         ===========

      Income taxes paid                                                $      --           $      --         $        --
                                                                       =========           =========         ===========

NON-CASH TRANSACTIONS:
      Common stock issued for acquisition of subsidiary                $      --           $      --         $ 1,925,000
      Note issued for purchase of property, equipment,
            and operating expenses                                     $      --           $      --         $     3,635
      Note issued for pending patent to related party                  $      --           $      --         $    33,330
      Warrants issued for financing activities                         $      --           $      --         $   219,642
      Stock options issued for consulting fees                         $  12,173           $      --         $   849,173
      Stock issued for consulting fees                                 $ 112,000           $      --         $   112,000
      Stockholder's contribution for equipment                         $      --           $      --         $     1,847
      Payable for license agreement                                    $      --           $ 450,000         $        --
</TABLE>

             See accompanying notes and accountant's review report.


                                       7
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                 March 31, 2002

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Envirokare  Tech,  Inc.,  (hereinafter  "the  Company"  or  "Envirokare"),   was
incorporated  in June 1998  under the laws of the State of Nevada.  In  December
1998, the Company  acquired the property,  assets and undertakings of a business
engaged in  manufacturing  and  developing a rubber mold  technology  and patent
rights potentially applicable to future development of a pallet made of recycled
materials. The Company is currently developing marketing and manufacturing plans
for the  products  under  development.  The Company  maintains  an office in Las
Vegas, Nevada. The Company has elected a fiscal year-end of December 31.

The  Company  includes  the assets and  investment  in  Electroship  Acquisition
Corporation  and  Envirokare   Composite   Corp.,   wholly-owned   non-operating
subsidiaries, in these financial statements. See Notes 3 and 7.

The Company is in the development  stage and, as of March 31, 2002, had realized
no revenues from its planned operations.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of  significant  accounting  policies of Envirokare is presented to
assist in  understanding  the  Company's  financial  statements.  The  financial
statements and notes are representations of the Company's  management,  which is
responsible  for their  integrity and  objectivity.  These  accounting  policies
conform to  accounting  principles  generally  accepted in the United  States of
America and have been  consistently  applied in the preparation of the financial
statements.

Going Concern

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern.

As shown in the accompanying  financial statements,  the Company has incurred an
accumulated deficit of $3,043,256, which includes a net loss of $282,258 for the
three  months  ended March 31, 2002,  and has a working  capital  deficit and no
revenues.  The  Company,  being a  development  stage  enterprise,  is currently
putting  technology in place which will, if  successful,  mitigate these factors
which raise substantial doubt about the Company's ability to continue as a going
concern.  Management  plans to fund operations from sales of its debt and equity
in the near-term and from product sales on an ongoing basis.

The Company  has  historically  raised  equity  capital  through the sale of its
common and preferred  stock.  Management has proceeded as planned in the ongoing
development of a recycled plastic composite pallet.  The Company has worked with
contract  laboratories  to conduct  in-depth  analysis of  compounds.  Extrusion
methods and  equipment  modifications  have been  studied and  refined,  as have
initial  prototypes.  The Company has contracted  with  Thermoplastic  Composite
Designs Inc. and Thermoplastic  Flowforming  Technologies Corp. for professional
and technical


                                       8
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                 March 31, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Going Concern (continued)

services in order to improve the  Company's  prospective  product  offerings and
manufacturing  processes.  The finished  product is expected to be available for
distribution to potential customers for in-use evaluation in the near future.

The  financial  statements  do  not  include  any  adjustments  relating  to the
recoverability  and  classification  of  recorded  assets,  or the  amounts  and
classification  of liabilities  that might be necessary in the event the Company
cannot continue in its present form.

Accounting Method

The Company's  financial  statements  are prepared  using the accrual  method of
accounting.

Cash and Cash Equivalents

For purposes of the statements of cash flows,  the Company  considers all highly
liquid  investments with original  maturities of three months or less to be cash
equivalents.

Compensated Absences

Employees  of the Company  are  entitled  to paid  vacation,  paid sick days and
personal days off depending on job classification,  length of service, and other
factors.  The Company's policy is to recognize the cost of compensated  absences
when  actually  paid to  employees.  If this  accrual  amount could be currently
estimated, it would not be recognized,  as the amount would be deemed immaterial
at this time.

Development Stage Activities

The Company has been in the development  stage since its formation in June 1998.
It is primarily  engaged in the refinement of a  manufacturing  process which is
based on research  findings for the  development of pallets made of recycled and
virgin plastic materials.

Derivative Instruments

The Financial  Accounting Standards Board ("FASB") issued Statement of Financial
Accounting  Standards ("SFAS") No. 133,  "Accounting for Derivative  Instruments
and Hedging  Activities," as amended by SFAS No. 137, "Accounting for Derivative
Instruments and Hedging  Activities - Deferral of the Effective Date of FASB No.
133",  and SFAS No. 138,  "Accounting  for Certain  Derivative  Instruments  and
Certain Hedging Activities", which is effective for the Company as of January 1,
2001.  These  statements   establish  accounting  and  reporting  standards  for
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts,  and for  hedging  activities.  They  require  that an  entity
recognize all  derivatives as either assets or  liabilities in the  consolidated
balance sheet and measure those instruments at fair value.

If certain conditions are met, a derivative may be specifically  designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging  derivative  with the  recognition of (i) the changes in the fair
value of the hedged asset or liability that are  attributable to the hedged risk
or (ii) the earnings effect of the hedged forecasted transaction. For


                                       9
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                 March 31, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Derivative Instruments (continued)

a  derivative  not  designated  as a  hedging  instrument,  the  gain or loss is
recognized in income in the period of change.

Historically,  the Company has not entered  into  derivative  contracts to hedge
existing risks or for speculative purposes.

At March 31, 2002, the Company has not engaged in any transactions that would be
considered derivative instruments or hedging activities.

Fair Value of Financial Instruments

The  carrying  amounts for cash,  accounts  payable,  notes  payable and accrued
liabilities approximate their fair value.

Loss Per Share

Loss per share was  computed by dividing  the net loss by the  weighted  average
number of shares  outstanding  during the period. The weighted average number of
shares was calculated by taking the number of shares  outstanding  and weighting
them by the amount of time that they were outstanding.  Basic and diluted shares
outstanding are the same, as the inclusion of common stock  equivalents would be
anti-dilutive.  As of March 31, 2002, the Company had stock options and warrants
outstanding,  equivalent to 7,025,000 common stock shares,  which are considered
to be anti-dilutive.

Principles of Consolidation

The Company's  financial  statements include the accounts of the Company and its
wholly-owned  subsidiaries.  All material intercompany transactions and accounts
have been eliminated in the financial statements.

Provision for Taxes

Income taxes are provided based upon the liability method of accounting pursuant
to SFAS No. 109  "Accounting  for Income  Taxes"  ("SFAS No.  109").  Under this
approach,  deferred income taxes are recorded to reflect the tax consequences on
future years of differences  between the tax basis of assets and liabilities and
their  financial  reporting  amounts at each year end. A valuation  allowance is
recorded  against deferred tax assets if management does not believe the Company
has met the "more  likely  than not"  standard  imposed by SFAS No. 109 to allow
recognition of such an asset.

At March 31,  2002,  the Company had net  deferred  tax assets of  approximately
$377,700,  principally  arising from net operating loss carryforwards for income
tax  purposes.  As management of the Company  cannot  determine  that it is more
likely than not that the Company  will  realize the benefit of the net  deferred
tax asset,  a valuation  allowance  equal to the net deferred tax asset has been
established at March 31, 2002.


                                       10
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                 March 31, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Provision for Taxes (continued)

At  March  31,  2002,  the  Company  has net  operating  loss  carryforwards  of
approximately  $1,888,000,  which expire in the years 2018 through 2022. The net
operating loss carryforwards do not include expenses that are not deductible for
tax  purposes,  such  as  compensation  expense,  in the  amount  of  $1,180,815
attributable to options,  warrants and restricted  stock issued to employees and
consultants.

Reclassification

The  reclassification  of expenses in the financial  statements  has resulted in
certain changes in presentation  which have no effect on the reported net losses
or shareholders' equity for the periods presented.

Comprehensive Income and Loss

In June 1997,  the FASB issued SFAS No. 130,  "Reporting  Comprehensive  Income"
("SFAS No. 130").  SFAS 130  establishes  standards for reporting and displaying
comprehensive income, its components and accumulated  balances.  The adoption of
SFAS 130,  related to  comprehensive  income,  is disclosed in the  accompanying
financial statements.

Accounting Pronouncements

In September  2000, the FASB issued SFAS No. 140  "Accounting  for Transfers and
Servicing of Financial  Assets and  Extinguishment  of  Liabilities"  ("SFAS No.
140"). This statement provides  accounting and reporting standards for transfers
and servicing of financial  assets and  extinguishment  of liabilities  and also
provides consistent  standards for distinguishing  transfers of financial assets
that are sales  from  transfers  that are  secured  borrowings.  SFAS No. 140 is
effective for recognition and reclassification of collateral and for disclosures
relating to  securitization  transactions and collateral for fiscal years ending
after  December  15, 2000,  and is  effective  for  transfers  and  servicing of
financial assets and  extinguishments  of liabilities  occurring after March 31,
2001.  The Company  believes  that the adoption of this standard will not have a
material effect on the Company's results of operations or financial position.

In June 2001, the FASB issued SFAS No. 141, "Business  Combinations"  ("SFAS No.
141") and SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142").
SFAS No. 141 provides for the elimination of the pooling-of-interests  method of
accounting for business combinations with an acquisition date of July 1, 2001 or
later.  SFAS No. 142 prohibits the amortization of goodwill and other intangible
assets  with  indefinite  lives  and  requires  periodic   reassessment  of  the
underlying  value of such assets for  impairment.  SFAS No. 142 is effective for
fiscal years  beginning  after  December 15, 2001. An early  adoption  provision
exists for  companies  with fiscal  years  beginning  after March 15,  2001.  On
September  1,  2001,  the  Company  adopted  SFAS No.  142.  Application  of the
nonamortization  provision of SFAS No. 142 will have no effect on the  Company's
financial  statements  as the Company  does not  currently  have any assets with
indefinite lives.


                                       11
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                 March 31, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting Pronouncements (continued)

In October 2001, the FASB issued SFAS No. 143,  "Accounting for Asset Retirement
Obligations"  ("SFAS No. 143"). SFAS No. 143 establishes  guidelines  related to
the retirement of tangible  long-lived  assets of the Company and the associated
retirement costs. This statement requires that the fair value of a liability for
an asset  retirement  obligation  be  recognized  in the  period  in which it is
incurred  if a  reasonable  estimate of fair value can be made.  The  associated
asset  retirement  costs are  capitalized as part of the carrying  amount of the
long-lived assets.  This statement is effective for financial  statements issued
for the fiscal years beginning after June 15, 2002 and with earlier  application
encouraged.  The  Company  adopted  SFAS No. 143 and does not  believe  that the
adoption will have a material impact on the financial  statements of the Company
at March 31, 2002.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived  Assets"  ("SFAS No.  144").  SFAS 144 replaces SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed  Of." This new standard  establishes a single  accounting  model for
long-lived assets to be disposed of by sale, including discontinued  operations.
Statement 144 requires that these long-lived  assets be measured at the lower of
carrying amount or fair value less cost to sell,  whether reported in continuing
operations or discontinued operations. This statement is effective beginning for
fiscal years after December 15, 2001, with earlier application  encouraged.  The
Company  adopted SFAS 144 and does not believe any adjustments are needed to the
carrying value of its assets at March 31, 2002.

Research and Development Costs

Costs of research and development are expensed as incurred.

Use of Estimates

The process of preparing  financial  statements  in conformity  with  accounting
principles  generally  accepted in the United States of America requires the use
of estimates and  assumptions  regarding  certain types of assets,  liabilities,
revenues,   and  expenses.   Such  estimates   primarily   relate  to  unsettled
transactions and events as of the date of the financial statements.

Concentration of Risk

The Company  maintains  its cash  account in one  commercial  bank in the United
States.  At times,  the  Company's  cash  balance is above the  Federal  Deposit
Insurance Corporation's (FDIC) limit of insurability.

Interim Financial Statements

The interim financial  statements for the period ended March 31, 2002,  included
herein,  have not been audited at the request of the  Company.  They reflect all
adjustments,  which are,  in the  opinion of  management,  necessary  to present
fairly the results of operations for the period. All such adjustments are normal
recurring adjustments. The results of operations for the period presented is not
necessarily indicative of the results to be expected for the full fiscal year.


                                       12
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                 March 31, 2002

NOTE 3 - INTANGIBLE ASSETS

In December 1998, the Company acquired technology rights from Mr. Real Morel and
his affiliated  companies of  International  Pallet Control Systems Inc. and The
Pallet  Company.  The Company is currently  investigating  the patent process on
this  technology.  During the years ended December 31, 2001, and 2000,  attorney
fees of  $1,733,  and  $7,787,  respectively,  were added to patent  costs.  The
amortization  of patent costs will begin when the final patents are granted.  If
the Company does not obtain the patent, the costs of acquiring the patent rights
from its originator will be charged to operations.

On  December  1,  2000,  the  Company  through  its   wholly-owned   subsidiary,
Electroship Acquisition Corporation,  acquired technology rights in exchange for
shares of the Company's common stock. See Note 7. The acquired technology rights
relate to an  application  stage  patent for an  invention  that is  expected to
facilitate  shipping  commerce  and/or  for  processing   information  regarding
shipping  services in a network  environment.  This acquisition was valued using
the trading price of the Company's common stock at the date of acquisition.

On March 30, 2001, the Company completed a license agreement with  Thermoplastic
Composite  Designs,  Inc.  (TCD) and  received  a  license  to  manufacture  the
Company's E Pallet, or Pallet,  and other products to be developed.  The license
fee is a one-time fee of $525,000  that was paid during the year ended  December
31, 2001.

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment are stated at cost.  Depreciation  is provided  using the
straight line method over the estimated  useful lives of the assets.  The useful
lives of property,  plant and equipment  for purposes of computing  depreciation
are five and seven years. The following is a summary of property,  equipment and
accumulated depreciation.

                                                      March 31,     December 31,
                                                         2002           2001
                                                     -----------    ------------
     Furniture and Fixtures                          $     1,893    $      1,893
     Less: Accumulated Depreciation                          948             899
                                                     -----------    ------------
     Net Furniture & Fixtures                        $       945    $        994
                                                     ===========    ============

     Office Equipment                                $     7,999    $      7,999
     Less: Accumulated Depreciation                        4,318           3,930
                                                     -----------    ------------
     Net Office Equipment                            $     3,681    $      4,069
                                                     ===========    ============

     Molds                                           $    51,000    $     43,000
                                                     ===========    ============


                                       13
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                 March 31, 2002

NOTE 4 - PROPERTY AND EQUIPMENT (continued)

The Company, in the development of its pallet products, has acquired two sets of
molds. The first generation mold was utilized for preliminary testing and pallet
redesign  purposes.  This mold was  developed  at a cost of $70,000 and is of no
commercial value. Accordingly,  the first generation mold costs were expensed to
research and development on September 30, 2001. The second generation molds were
acquired at a cost of $43,000.  These molds are currently  carried at cost.  The
Company is  continuing  its research  and  development  using these molds.  When
completed  and  placed in  service,  the molds  will be  depreciated  over their
expected useful lives.

The Company, in the development of prototype construction products, has acquired
a mold  that will  produce  an I Beam.  This  first  generation  I Beam mold was
developed  at a cost of $8,000.  This mold is  currently  carried  at cost.  The
Company is  continuing  its  research  and  development  using  this mold.  When
completed and placed in service,  the mold will be depreciated over its expected
useful life.

NOTE 5 - SHORT-TERM DEBT

Short-term  notes  payable at March 31, 2002 and  December  31, 2001  consist of
unsecured  notes bearing 10% interest.  These notes,  which  originated  between
August 18, 1998 and December 16, 1998, are payable to Mr. Real Morel and are due
on  demand.  The  principal  amount on the notes is  $61,965.  Accrued  interest
recorded  on the notes  payable  at March 31,  2002 and  December  31,  2001 was
$20,735 and $19,186, respectively.

The  Company is a named  defendant  in an action  filed by Mr. Real Morel in the
Supreme Court of British Columbia, Canada, under which the Company was served in
May 2000.  In this  action,  Mr.  Morel  alleges  non-payment  by the Company of
amounts due  pursuant  to the  aforementioned  demand  promissory  notes.  After
consultation   with  British   Columbia  legal  counsel  and  a  review  of  the
circumstances surrounding the issuance of the notes, the Company has resolved to
dispute this liability. Management of the Company believes that the outcome will
not have a material adverse effect on the financial position of the Company.

NOTE 6 - LONG-TERM DEBT

As of March 31, 2002, long-term debt consisted of a $100,000 note payable, dated
July 9, 2001, a $200,000 note payable, dated September 30, 2001, a $200,000 note
payable,  dated  November 9, 2001, a $375,000 note payable,  dated  November 15,
2001, a $100,000  note  payable,  dated  November  16, 2001,  and a $50,000 note
payable,  dated November 23, 2001. All of the aforementioned notes are unsecured
and bear interest at 15% per annum, payable at maturity, which is two years from
the dates of issuance.  Three common stock  warrants are attached to each dollar
of debt,  with an exercise  price of $0.195 per share.  These warrants are fully
exercisable for up to two years from the dates of issuance. See Note 9.


                                       14
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                 March 31, 2002

NOTE 7 - COMMON STOCK

During March 2002, 500,000 units of the Company, consisting of 500,000 shares of
common  stock with one warrant  attached to each  common  share,  were issued at
$0.10 per unit.  Each warrant is  exercisable at $0.25 per share until March 12,
2004.  See Note 9. These shares were issued in reliance upon the exemption  from
the  registration  requirements  of the Securities Act of 1933 (the  "Securities
Act") under Regulation D as specified by the provisions of Rule 506.

During June 2001, 1,000,000 units of the Company, consisting of 1,000,000 shares
of common stock with one warrant  attached to each common share,  were issued at
$0.20 per unit.  Each warrant is  exercisable  at $0.50 per share until June 30,
2003.  See Note 9. These shares were issued in reliance upon the exemption  from
the  registration  requirements  of the  Securities  Act under  Regulation  D as
specified by the provisions of Regulation S and Rule 506.

On  December  1,  2000,  Electroship  Acquisition  Corporation,  a  wholly-owned
subsidiary  of the  Company,  acquired  Electroship  (N.Y.) Inc. in exchange for
2,500,000  common stock shares of Envirokare.  These shares were valued at $0.77
per share, which was fair market value on the date of the acquisition agreement.
See  Note 3.  Electroship  Acquisition  Corporation  acquired  the  intellectual
property   previously  held  by  Electroship   (N.Y.)  Inc.  whose   predecessor
organization was a partnership created to hold the intellectual property rights.
Neither Electroship (N.Y.) Inc. nor its predecessor  partnership were considered
operating  entities.  Neither entity had material  transactions  during 2000. As
such, no proforma financial information is contained in these disclosures.

During December 2000,  100,000 stock options were exercised at $0.575 per common
stock share.  These stock options were granted under the Envirokare  Tech,  Inc.
1999 Stock Option Plan. See Note 9.

During  September 2000,  200,000 shares of common stock were issued at $0.50 per
share.  These  shares  were  issued  in  reliance  upon the  exemption  from the
registration  requirements  of the Securities Act specified by the provisions of
Regulation S.

During the month of February 2000, 343,338 shares of common stock were issued at
$0.75 per share. The Company's common stock was split 2-for-1 in March 2000. The
split was effected as a 100% stock dividend  payable March 6, 2000 to holders of
record at March 1, 2000. All references in the accompanying financial statements
to the number of common shares and per share amounts for the year ended December
31, 2000 have been restated to reflect the stock split.

During the year ended  December  31, 1999,  746,140  shares of common stock were
issued for cash. At December 31, 1999,  the balance of stock  subscriptions  was
$105,000.  Stock  subscriptions were paid and stock issued February 16, 2000 for
these common stock shares.

On February  22, 1999,  the  Company's  board of directors  authorized a 1-for-2
reverse stock split of the Company's $0.001 par value common stock.


                                       15
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                 March 31, 2002

NOTE 7 - COMMON STOCK (continued)

Upon incorporation on September 15, 1998, 10,000,000 shares of common stock were
issued at $0.001 per share,  under Regulation D, Rule 504. At December 31, 1998,
this common  stock was held by 30  shareholders,  none of whom held in excess of
ten percent of the total.

NOTE 8 - PREFERRED STOCK

During the year ended December 31, 1999,  500,000 shares of preferred stock were
issued for $250,000 cash.  The preferred  stock has no dividend  rights,  but is
convertible  to  common  stock  at the rate of ten  shares  of  common  for each
preferred share. This conversion feature was modified to twenty shares to one by
the stock split effective March 1, 2000. The preferred  shareholders  elected to
exercise  the  conversion   feature   attached  to  the  preferred   stock  and,
accordingly, 10,000,000 shares of Company's common stock were issued on November
9, 2001 to the preferred stockholders of record on that date.

NOTE 9 - STOCK OPTIONS AND WARRANTS

In  accordance  with SFAS No. 123, the fair value of stock  options and warrants
granted are estimated  using the  Black-Scholes  Option Price  Calculation.  The
following  assumptions  were made to value the stock options and  warrants:  for
2001 and 2002, risk-free interest rate of 4%, volatility of 91.25%.

Warrants

During March 2002,  500,000 shares of common stock with one warrant  attached to
each common stock share were issued.  Each warrant is  exercisable  at $0.25 per
share until March 12, 2004. These warrants were valued at $0.06 per share, for a
total of $31,050. See Note 7.

During June 2001,  1,000,000 shares of common stock with one warrant attached to
each common stock share were issued.  Each warrant is  exercisable  at $0.50 per
share until June 30, 2003.  These warrants were valued at $0.06 per share, for a
total of $60,000. See Note 7.

During 2001,  $1,025,000 was raised in a private debt  offering.  Three warrants
are attached to each dollar of debt, with an exercise price of $0.195 per share.
These  warrants  are fully  exercisable  for up to two  years  from the dates of
issuance.  These  warrants  were  valued  at  $0.07  per  share,  for a total of
$219,642. See Note 6.

Stock Options

In September  1999, the board of directors of the Company adopted the Envirokare
Tech,  Inc.  1999 Stock Option Plan (the "Plan") for the purpose of  attracting,
retaining and motivating  employees,  directors and  consultants of the Company.
The  shareholders  approved  the Plan at their  annual  meeting in May 2000.  As
adopted, the Plan provides for authorization of 2,000,000


                                       16
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                 March 31, 2002

NOTE 9 - STOCK OPTIONS AND WARRANTS (continued)

Stock Options (continued)

shares of common  stock  for  issuance  pursuant  to awards  under the Plan.  In
September   1999,   the  board  of  directors   had  approved  the  granting  of
non-qualified  options under the Plan to purchase an aggregate  1,150,000 shares
of common stock. In June 2000, the board of directors voted to adjust the number
of shares of common stock  authorized for issuance under the Plan from 2,000,000
to 4,000,000,  pursuant to the anti-dilution  provisions of the Plan, to reflect
the 2-for-1  split of the  Company's  common stock  effected in March 2000.  The
board of directors also voted to make corresponding adjustments to the number of
shares  subject to previous  option  grants and to the exercise  prices for such
options.

All of the options  granted by the Company are  exercisable  upon issuance.  The
Plan restricts sales for shares received upon exercise of non-qualified options,
limiting each optionee to sales in any year of option shares equal to 25% of the
total number of shares  received under the optionee's  grant.  The Plan requires
early exercising of the stock options for various reasons,  including employment
termination,  separation  from  services,  and  cancellation  or  completion  of
consulting contracts.

The Company filed a Form S-8 under the  Securities  Act with the  Securities and
Exchange  Commission in March 2000 to register  1,150,000  shares  (2,300,000 as
adjusted for the stock split) of common stock  authorized for issuance under the
Plan. In September 2000, the Company filed Post-Effective Amendment No. 1 to the
Form S-8, to register the remaining  1,700,000  shares under the Securities Act.
For the year ended  December 31, 1999, the Company  recorded  $552,000 ($.24 per
option) in consulting  fees for the value of these options.  These stock options
will expire September 29, 2009. See Note 10.

On February  28, 2002,  stock  options  totaling  200,000  expired.  These stock
options  were  valued at $0.15 per option for a total of  $30,000.  On March 13,
2002, stock options totaling 100,000 expired. These stock options were valued at
$0.29 per option for a total of $29,000.  On January  15,  2002,  stock  options
totaling 100,000 were issued.  These options were valued at $0.12 per option for
a total of $12,173.

On March 6, 2001, stock options  totaling  300,000 expired.  These stock options
were valued at $0.24 per option for a total of $72,000.  On June 28, 2001, stock
options totaling  250,000 expired.  These stock options were valued at $0.24 per
option for a total of  $60,000.  On January 16,  2001,  stock  options  totaling
100,000 were issued.  These  options were valued at $0.29 per option for a total
of $29,000. On March 14, 2001, stock options totaling 700,000 were issued. These
options  were  valued at $0.15 per option for a total of  $105,000.  On June 28,
2001,  stock  options  totaling  200,000 were issued.  These stock  options were
valued at $0.15 per option for a total of $30,000.


                                       17
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                 March 31, 2002

NOTE 9 - STOCK OPTIONS AND WARRANTS (continued)

Stock Options (continued)

                                                                        Weighted
                                                                        Average
                                                                        Exercise
                                                            Shares       Price
                                                           ---------    --------
Outstanding at January 1, 2001                             2,200,000
Expired                                                     (550,000)   $  0.575
Granted                                                      100,000       0.600
Granted                                                      900,000       0.300
                                                           ---------    --------
Outstanding and exercisable at December 31, 2001           2,650,000    $  0.469
                                                           =========    ========

Outstanding at January 1, 2002                             2,650,000
Expired                                                     (100,000)   $  0.600
Expired                                                     (200,000)      0.300
Granted                                                      100,000       0.300
                                                           ---------    --------
Outstanding and exercisable at March 31, 2002              2,450,000
                                                           =========

Weighted average fair value of options granted during
the three months ended March 31, 2002                                   $   0.12
                                                                        ========

NOTE 10 - RELATED PARTIES

Jeannie M. Runnalls, who was appointed president, secretary, and director of the
Company on January 24, 2000, received $32,988 in cash for consulting fees during
the year ended December 31, 2000 and $22,715 in cash for consulting  fees during
1999.

On August 8, 2000, the Company  authorized a shareholder's  loan to Ms. Runnalls
in the amount of $15,000.  Terms of the unsecured,  demand loan require interest
payments of 7% per annum, simple interest. This loan was retired during December
2001 in  consideration  of  consulting  services  provided to the Company by Ms.
Runnalls during the fourth quarter of 2001, valued at $6,753.

Stock options of 2,300,000 were issued for common stock shares during the year
ended December 31, 1999. Of these stock options, 1,000,000 were issued to
related parties. During the year ended December 31, 2000, the Company granted
200,000 stock options for common stock shares to the then president of the
Company. See Note 9. On December 11, 2000, the president of the Company resigned
and remained a member of the board of directors of the Company until December 8,
2001.


                                       18
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                 March 31, 2002

NOTE 10 - RELATED PARTIES (continued)

During 2001, a shareholder loaned the Company $285,000.  This amount,  including
interest  calculated  at 10% per annum,  was paid in full on November  15, 2001.
This same  shareholder  invested  $375,000 in an unsecured  note payable,  dated
November 15, 2001, bearing interest at 15% per annum, payable at maturity, which
is two years from the date of issuance. See Note 6. As of December 31, 2001, the
Company owed this  shareholder  $20,921 for reimbursable  expenses.  The Company
paid the expenses owing to this shareholder during the first quarter of 2002.

On January 16, 2001, the Company  granted 100,000 stock options for common stock
shares to Trevor  Bedford,  who was a member  of the board of  directors  of the
Company.  Effective  September 13, 2001, Mr. Bedford resigned as a member of the
board of directors of the Company.  The options  granted to Mr. Bedford  expired
unexercised on March 13, 2002.

On March 14, 2001,  the Company  granted  100,000 stock options for common stock
shares to Charles Stein,  then  president of the Company.  See Note 9. Effective
May 1, 2001,  Mr.  Stein  resigned as  president  of the Company and  remained a
member of the board of directors of the Company until November 27, 2001.

On March 14, 2001,  the Company  granted  300,000 stock options for common stock
shares each to Gerald  Breslauer,  the vice president of  administration  of the
Company,  and Mark Kallan,  the  executive  vice  president of the Company.  Mr.
Breslauer and Mr. Kallan resigned their respective positions with the Company on
November 28, 2001.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Lease Agreements

The Company  entered into a lease for office space in Las Vegas,  Nevada for the
period of thirty-six  months  beginning  October 1, 1998. The lease was extended
for a three-month  period to December 31, 2001, by mutual agreement  between the
landlord  and the  Company.  The lease  agreement  was further  extended  for an
additional twelve-month period to December 31, 2002, by mutual agreement between
the landlord and the Company.  Monthly  payments are  currently  $838 per month,
including  $40 for  utilities.  In compliance  with the terms of the lease,  the
Company has purchased comprehensive public liability insurance.

The Company  entered  into a lease for office  space in Boca  Raton,  Florida on
February 7, 2001 for sixty months.  Monthly  payments of the lease are currently
$2,795 per month with additional charges for common area. A security deposit and
last  month's  rent were paid in the amount of $8,412.  A portion of this office
space is being  subleased with the sub-lessee  reimbursing the Company $3,000 of
the  security  deposit  and last  month's  rent.  There is no  written  sublease
agreement at this time.  The Company made lease  payments for the Florida office
totaling $4,000 during the first quarter of 2002.


                                       19
<PAGE>

                              ENVIROKARE TECH, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                 March 31, 2002

NOTE 11 - COMMITMENTS AND CONTINGENCIES (continued)

Lease Agreements (continued)

Future  annual  minimum  lease  payments for the term of the Florida lease as of
March 31, 2002 are as follows for the years ending December 31:

                      2002           $29,534
                      2003           $34,876
                      2004           $36,272
                      2005           $37,725
                      2006           $39,235

The Company is no longer  occupying the Florida office.  Pursuant to a letter of
understanding between Gerald Breslauer and the Company, dated November 28, 2001,
Mr. Breslauer will be compensated by the Company in the amount of $15,000 should
he be successful in locating a suitable  tenant to sublease the remainder of the
Company's Florida office space.

Litigation

For information on the Company's only litigation, see Note 5.

Merger Agreement with Thermoplastic Composite Designs, Inc.

The Company and  Thermoplastic  Composite  Designs,  Inc.  (herein  after "TCD")
entered into a merger  agreement  dated March 30, 2001,  which provides that TCD
will merge  with  Envirokare's  wholly-owned  subsidiary,  Envirokare  Composite
Corp., upon certain specific terms and conditions.  This merger, if consummated,
will require the Company to issue  3,000,000  shares of common stock in exchange
for all of the outstanding stock of TCD, if the Company's common stock trades in
a nationally  recognized securities market, such as the NYSE, NASDAQ (or OTCBB),
or AMEX, at a minimum five dollar  ($5.00) value for thirty (30) days during the
thirty (30) month period immediately following March 30, 2001. At the end of the
thirty (30) month  period  following  March 30,  2001,  if the market  value for
3,000,000  shares of the Company's  common stock is less than  $15,000,000,  the
Company may elect to provide  additional  shares of common  stock or cash to the
TCD stockholders to meet the required $15,000,000 purchase price. Any payment of
cash under this  option  shall not exceed  $7,500,000.  The Company has the sole
option to determine the amounts of  additional  stock or cash that would be paid
under the option.

NOTE 12 - SUBSEQUENT EVENT

Warrants Issued

During April 2002, a related party purchased 1,000,000 units of the Company in a
private  placement  transaction  for a  purchase  price of $0.10 per unit for an
aggregate  purchase  price of $100,000.  Each unit  consists of one share of the
Company's  common stock and one warrant,  exercisable at any time until April 3,
2004,  to purchase one share of common  stock at an exercise  price of $0.25 per
share.


                                       20
<PAGE>

Item 2. Plan of Operation

     This Form 10-QSB  contains some  statements  that the Company  believes are
"forward-looking  statements."  Forward-looking  statements  include  statements
about future business plans and strategies of the Company,  statements about the
future of the pallet industry, and most other statements that are not historical
in nature. Because  forward-looking  statements involve risks and uncertainties,
there are factors,  including  those  discussed  below,  that could cause actual
results to be  materially  different  from any future  results,  performance  or
achievements  expressed  or implied.  The Company has  attempted to identify the
major  factors  that could  cause  differences  between  actual  and  planned or
expected results,  but there can be no assurance that the Company has identified
all of those  factors.  Accordingly,  readers should not place undue reliance on
forward-looking  statements.  Also,  the Company has no  obligation  to publicly
update forward-looking statements it makes in this Form 10-QSB.

     Overview

     The Company is currently in the development stage and has not yet generated
any operating  revenues.  The Company was originally formed to create and market
environmentally  responsible products that would contain a component of recycled
materials in their manufacture. Currently, the Company is completing development
of  industrial  and  commercial  products,  through a licensing  agreement  with
Thermoplastic  Composite  Designs,  Inc.  ("TCD"),  a research  and  development
organization, which has developed and is attempting to secure patents on certain
processes for itself.  Specifically,  the license agreement contains  provisions
for  the  Company  to  commercially  exploit  the  TCD  developed  Thermoplastic
Flowforming  process ("TPF Process" or "Process",  see below for a discussion of
the TPF process) by marketing products currently in development and creating and
marketing  other  contemplated   products  within  various  market  sectors  and
industries.

     The Company's  current  operating  strategy is consistent with its focus on
developing  environmentally  responsible products. As products are developed and
readied for market,  the Company  intends to enter into operations to bring such
products to market through license  agreements and  potentially  through its own
production efforts.

     The Company  anticipates that the materials  handling  industry will be the
initial entry point for the Company's  first  commercial  application of the TPF
Process,  with the  introduction  of the Company  developed E Pallet  (sometimes
referred  to  herein  as the  "Pallet").  A pallet is a  portable  platform  for
handling,  storing,  or moving  materials  and packages as used in, for example,
warehouses, factories and vehicles.


                                       21
<PAGE>

     The Company possesses  previous  experience in the pallet industry,  having
entered the pallet manufacturing business in December 1998. Pursuant to an asset
purchase  agreement and an assignment  agreement,  each dated December 15, 1998,
the  Company  purchased   certain  assets,   including  all  of  the  equipment,
early-stage rubber mold technology and patent rights  potentially  applicable to
future  development  of rubber  mold  technology  for  creating a pallet made of
recycled  materials,  from Real Morel,  a  businessman  operating  International
Pallet  Control  Systems Inc.  and The Pallet  Company,  both  private  Canadian
companies.  The Company  substantially  improved upon the purchased  early-stage
rubber mold  technology  and  developed,  after more than a year of research and
working  with  specialists  in the  field,  a molded  Pallet  created  by mixing
plastics  with  composite  materials.  The Company  believes  that the  finished
product will meet the requirements of many pallet users.

     In November  1999,  the Company  enlisted the services of TCD to design and
supply the  appropriate  system  required  to  manufacture  the Pallet and other
contemplated  materials handling products.  TCD was also contracted to assist in
making Pallet design  modifications to meet product  specifications  provided by
the Company.

     On March 30,  2001,  the  Company,  through  its  wholly-owned  subsidiary,
Envirokare Composite Corp. ("ECC"),  entered into a licensing agreement with TCD
to  manufacture  the Pallet and other  products to be  developed.  Additionally,
Envirokare and ECC also entered into a merger agreement with TCD, which provides
that TCD will merge with ECC if  Envirokare's  shares trade at a specified level
during the thirty (30) month period  following the agreement  date. In the event
that  Envirokare's  shares have not traded at such specified level by the end of
the thirty (30) month period,  then ECC and Envirokare have the option to effect
the  merger  of  TCD  with  ECC  by  paying  to  TCD's  shareholders  additional
consideration, either in cash or additional shares of Envirokare.

     In  addition to  Pallets,  the Company  expects to be able to market a wide
range of large  structural parts  manufactured  through the joint efforts of the
Company  and TCD,  for  industries  which  may  include  aerospace,  automotive,
construction, marine, medical, military, transportation and waste management.

     The Company had originally  planned to have licensees  begin  producing the
Pallet in 2000,  but  decided to conduct  additional  tests,  which  delayed the
previously  planned  production  start  date.  The  discovery  of  significantly
improved  substrate  technology  caused  the  Company  to  rethink  its  initial
production   start  dates,  as  well  as  production  and  marketing   strategy.
Consequently,  additional product development and testing has been required that
is specific to the  improved  substrate  composition,  prior to  initiating  the
launch of production operations.


                                       22
<PAGE>

     Although the Company's  decision to further develop and test the Pallet has
set back production  dates, the Company  believes that this additional  research
and development has substantially minimized or eliminated any concerns as to the
Pallet's  design and  ability to  perform.  The  Company's  testing  program has
included  in-depth  analysis  of  substrate  compounds,  extrusion  methods  and
equipment  modifications.  Initial  prototypes of the Pallet have been developed
and refined. The Company expects to have potential customers evaluate the Pallet
through  in-use  testing  sometime  during  the  second  half of  2002.  Company
management  anticipates  that  the  Company,  or its  licensees,  will  commence
commercial  production of the Pallet once appropriate  production facilities are
procured and commissioned for production,  currently anticipated for sometime in
2003, once the Pallet testing and evaluation phase is completed.

     Liquidity and Capital Resources

     The Company is not yet generating revenues.  For the period ended March 31,
2002, the Company had a net loss of $282,258. The Company's net loss accumulated
for the period from June 15, 1998  (inception) to March 31, 2001 was $3,043,256.
The Company  anticipates  that it will begin to generate revenue sometime during
2003, upon the planned start of commercial sales of the E Pallet by the Company,
or its licensees.  At March 31, 2002, the Company had current assets of $11,019.
During  the  period  ended  March  31,  2002,   the  Company's   cash  resources
increased/decreased  by  $107,908.  At March 31,  2002 the  Company  had current
liabilities of $171,914.  At March 31, 2002 current liabilities exceeded current
assets by $160,895.  Other than as discussed  above, the Company is not aware of
any trends,  demands,  commitments or uncertainties,  other than those affecting
business  and the  economy  in  general,  that  could  result  in the  Company's
liquidity decreasing or increasing in a material way within the next 12 months.

     To date,  the Company has raised  capital  through  private  placements  of
common stock,  convertible  preferred  stock and units  consisting of promissory
notes and attached warrants.  The Company has budgeted  pre-production and other
production-related  expenditures for the twelve months through March 31, 2003 at
$360,000,  excluding license fees which may become due and payable, and plans to
raise  additional  funds in the  next  several  months  to  cover  its  proposed
expenditures. These funds may be raised through additional equity financings, as
well as borrowings and other  resources.  There can be no  assurances,  however,
that the Company will be able to raise these funds.

     Since late 2000, the Company has been raising  capital  through a series of
private  placements.  Although it encountered  difficulties during late 2000 and
early 2001,  due in part to the volatile  condition of the equity  markets,  the
Company  believes  that  it  has  recently  overcome  such  difficulties,  as it
completed in the second quarter of 2001 a private placement  consisting of units
of  the  Company's   common  stock  and  warrants  to  purchase   common  stock.
Additionally,  the Company  completed a new private  placement  of units


                                       23
<PAGE>

during  November 2001.  This offering  consisted of a promissory note that bears
interest at a rate of 15% per annum and a warrant to  purchase  three (3) shares
of the  Company's  common  stock,  at an  exercise  price of $0.195  per  share,
exercisable for two (2) years from the date of subscription.  The Company raised
one million  twenty-five  thousand  dollars  ($1,025,000) in this offering.  The
Company is currently conducting a private placement offering of units at a price
of $0.10 per unit, each unit consisting of one (1) share of the Company's common
stock and a warrant to purchase one (1) share of the Company's  common stock, at
an  exercise  price of $0.25 per share,  exercisable  for two (2) years from the
date of  subscription.  The Company raised fifty thousand  dollars  ($50,000) in
this offering as of March 31, 2002.

     The Company is currently  holding  discussions with potential  investors in
connection with its ongoing unit offering. As a result of discussions concerning
the  offering,  since  April 1, 2002 the Company  has raised an  additional  one
hundred  thousand  dollars  ($100,000)  through  the  sale of  units in the unit
offering.  With the capital it has raised to date, and the  additional  funds it
plans to raise in the next several months,  the Company believes that it will be
able to continue with its  production  and marketing  plans,  which in the short
term  include  the   establishment  of  licensee  funded  Pallet   manufacturing
operations,  and  in  the  longer  term  include  adding  additional  production
facilities   either  through   licensees  or  the  Company's  own  manufacturing
facilities. The Company's management believes that its financing plans described
above will enable it to meet its obligations  including cash requirements for at
least the next twelve months to March 31, 2003.

     To achieve and  maintain  competitiveness  of its  products  and to conduct
further  testing and  development  that will allow the Company to enter into the
production  stage  of  operations,   the  Company  will  be  required  to  raise
substantial  funds in addition to funds already  raised  through the issuance of
the Company's securities. There can be no assurance that additional funding will
be  available  under  favorable  terms,  if at all.  If  adequate  funds are not
available, the Company may be required to curtail operations significantly.  For
example,  the  Company's  plans  include the  possibility  of setting up its own
production  operations,  in addition to having licensees produce various Company
products under development. If the Company cannot raise enough funds, it may not
be able to  carry  out a plan to set up its own  manufacturing  operations.  The
Company might also have to obtain funds through entering into  arrangements with
collaborative  partners or others.  That could require the Company to relinquish
rights to certain  products,  which could impair future  sources of revenues for
the Company.

     Products; Product Development

     The Company anticipates that its first product to be commercialized will be
the Pallet, made through the unique TPF manufacturing  Process, which allows for
up to 80%


                                       24
<PAGE>

of the Pallet  material  to be  comprized  of recycled  thermoplastics.  The TPF
Process is proprietary and enables the  manufacturer to create large  structural
parts using thermoplastic resins. The Process uses recycled or virgin resins and
is designed to reuse its own waste,  thereby  minimizing  the  creation of waste
by-products.

     Key advantages of the Company's Pallet will include increased  strength and
durability,  lighter weight,  environmental  benefits (no lumber required,  100%
recyclable, no fungicides/bacterial spraying required, no land fill dumping, and
less energy to manufacture),  increased safety,  because there is no splintering
of wood or hazardous nails/bolts,  increased ease of use (because of 4 way entry
access   into  the   Pallet),   longer   life   cycle,   and  lower   costs  per
pallet-round-trip.  The Pallet has also been  designed to resist  damage  caused
from use and to  handle  large  loads  when  evenly  loaded.  The  single  piece
construction of the Pallet is expected to mitigate numerous product and personal
liability  issues  that  occur in  typical  pallet  programs.  As  there  are no
fasteners or components to break apart from the Pallet, the Company  anticipates
that its customers will experience reduced pallet breakage.

     The Company has been actively involved in extensive testing and development
of the  Pallet.  The  Company's  development  focus is to ensure that the Pallet
meets or exceeds  current market  standards and that the Pallet will be superior
in  performance  and will be cost  effective to produce and sell. In particular,
the Company's  development  efforts focus on the safety,  structural  integrity,
reliability,  and cost effectiveness of the Pallet,  involving in-depth analysis
of  compound   variables  and   strengths,   extrusion   methods  and  equipment
modifications.

     The Company  contracted with substrate  component  testing engineers in the
Akron,  Ohio area during 1999 who  performed  the  primary  series of  substrate
component  tests.  Subsequent to the  preliminary  tests  conducted on substrate
components,  the Company and TCD entered into a  product/technology  development
contract in connection  with TCD's  assisting  the Company in modifying  earlier
versions of the Pallet  design.  The  contract  required TCD to deliver a pallet
that would meet design specifications including: 48-inch by 40-inch dimension; a
maximum weight  requirement;  and a target substrate  composition.  The contract
also  provided  that TCD would supply the  appropriate  engineered  mold for the
Company's first production  facility.  The Company's  payments to TCD under this
contract for the development of a first  generation  Pallet mold totaled $50,800
in 1999 and $83,000 in 2000.

     Additional   Pallet  testing  and  evaluation  was  conducted  at  Virginia
Polytechnic Institute and State University, in Blacksburg, Virginia, through the
William H. Sardo Jr. Pallet and Container Research Laboratories  ("Virginia Tech
Testing  Facilities").  Pallet testing  commenced during May 2000.  Initial test
results at this  facility  provided  the basis from  which the  Company  and its
product design  contractor were able to make design


                                       25
<PAGE>

adjustments resulting in a significantly improved Pallet. Further Pallet testing
and  evaluation  through  2001  resulted  in further  adjustments  to the Pallet
design.  As a result of the  design  adjustments  and  modifications,  the first
generation mold was deemed to be of no commercial  value and the Company built a
second generation mold during 2001, at a cost of $43,000. This second generation
mold has produced  Pallets that are currently  being tested and evaluated at the
Virginia Tech Testing Facilities.

     The  additional  testing  conducted  on  Pallets  produced  from the  first
generation mold also provided  important  technical  information which aided the
Company  in  modifying  its  mold  design.   These  design   modifications  were
incorporated  into the  Company's  second  generation  Pallet mold.  Preliminary
analysis to date indicates that the Company's standard 48-inch by 40-inch Pallet
will surpass  current  hardwood  and plastic  pallet  performance  and will be a
strong competitor in the pallet industry worldwide. The Company anticipates that
final test results on Pallets produced from the second  generation molds will be
available during the second quarter of 2002.

     The Company will conduct further tests on the Pallet, with testing designed
to provide  information as to the longevity of the Pallet,  as compared to other
materials,  and to assist in  fine-tuning  design  elements  within  the  Pallet
profile.  The Company  expects to commission an  engineering  company during the
second quarter of 2002,  with the engagement to focus on fine-tuning  the Pallet
design.  Through this engagement,  design element  modifications are anticipated
for certain aspects of the underside of the Pallet. A primary  objective of this
redesign  work is to provide for a  significant  reduction  in the weight of the
Pallet,  which will make the Pallet a more  cost-effective  product  for Company
customers.  Information provided from this additional  engineering analysis will
further the development of marketing strategies for the Company. There can be no
assurance that this  additional  engineering  will not delay the Company's plans
for the commercialization of the Pallet.

     The  Company's  Pallet  design  presents  what the  Company  believes  is a
preferable  alternative  to pallets made from wood and from non-wood  materials.
Pallets had  traditionally  been made of wood but, due to  escalating  commodity
lumber prices and associated higher costs of wood pallets,  pallet manufacturers
have in recent years been developing  ways to manufacture  pallets from non-wood
materials, in particular,  metal, wood derivatives and plastic. However, each of
these  materials has its  disadvantages.  Metal pallets,  while they are strong,
hard to damage, and repairable, are expensive and not practical for general use.
Pallets made from pressed  wood fiber and  corrugated  fiber board are light and
recyclable.  However,  most pallets manufactured from this type of substrate are
not able to carry standard load weights,  are susceptible to damage,  and cannot
be repaired.  The most prevalent  non-wood  pallet  material,  plastic,  is more
cost-effective than wood but is nonetheless expensive. Also, plastic pallets can
be damaged by forklift tines, or by being dropped,  twisted or overloaded.  They
can also splinter,  causing


                                       26
<PAGE>

injuries to workers.  The Company  believes  that the recent  rapid  increase in
market share for plastic  pallets  indicates  that pallet buyers  understand the
benefits of  utilizing  substitutes  for wood  pallets.  This  presents a market
opportunity for the Company, as the Company considers the Pallet to be a durable
product and a cost-effective plastic pallet alternative.

     The Company believes that its  specialization  in thermoplastic  composites
will  provide  a   competitive   advantage  in  the  future.   Until   recently,
thermoplastic composites were not considered commercially viable substitutes for
thermoset composites, wood, aluminum, steel, and other metal alloys. However the
recent  introduction  of  long-strand   reinforcing  fiber(s)  has  dramatically
increased the mechanical and physical  properties of  thermoplastic  composites.
During past years, these thermoplastic  composite materials were utilized almost
exclusively be the military and aerospace  industries and were normally confined
to smaller parts,  due to the inordinate  cost of hand  application,  which is a
process of creating a part by manually applying layers of composite materials to
a mold or shape.

     TPF Process

     The TPF Process is a proprietary  process that enables the  manufacturer to
create  large  structural  parts using  thermoplastic  resins.  The Process uses
recycled  or virgin  resins  and is  designed  to reuse its own  waste,  thereby
minimizing the creation of waste by-products.

     The TPF  Process can  potentially  be used to create  products  for a broad
range  of  industries  including:  Material  Handling,  Transportation,  Marine,
Medical,  Waste  Management  and  Aerospace.  The composite  materials  products
created  using the Process  have the ability to mimic many  attributes  found in
wood,  aluminum,  steel,  and other metal alloys matching many of their physical
and  mechanical   properties  while  providing   significant   weight  and  cost
reductions.  Another  advantage  of the  Process  is that it does  not  emit any
Volatile  Organic  Contaminants  (VOCs),  which are  present  in many  thermoset
composites.

     Management  believes that the TPF Process will give  Envirokare the ability
to produce large  structural  parts at prices projected to be well below current
levels.  This  price  advantage  is the  result  of  projected  savings  for the
following reasons:

     o Economies of scale as a result of the  mechanical  reproduction  of large
structural parts,  rather than  necessitating  manufacture of smaller components
followed by component assembly.

     o Reduced labor costs because of fewer component assemblies required.


                                       27
<PAGE>

     o Reduced cost of  materials,  due to the ability to reuse waste  generated
from manufacturing.

     Acquisition of Electroship (N.Y.) Inc.

     On December 21, 2000,  the Company,  Electroship  Acquisition  Corp., a New
York  corporation  and a  wholly-owned  subsidiary  of Envirokare  ("EAC"),  and
Electroship (N.Y.) Inc., a New York corporation  ("Electroship") consummated the
merger of  Electroship  with and into EAC with EAC  continuing  as the surviving
corporation (the "Merger").  The consideration received by Electroship Partners,
the former  shareholder  of  Electroship,  in the Merger  consisted of 2,500,000
shares of the common stock, par value $.001 per share of Envirokare. Electroship
Partners has since dissolved and distributed its assets,  including such shares,
among its former partners. Electroship was engaged in the business of developing
wireless tracking technology for the shipping industry.

     The  primary  asset that the  Company  acquired in this merger was a patent
that was  provisionally  filed by Electroship  with the United States Patent and
Trade  Office   ("USPTO").   The  Company  made  application  to  the  USPTO  to
provisionally  refile the patent during the first  quarter of 2002.  The Company
anticipates that patents that may be issued as result of its provisional  filing
will  provide  the  Company  with,   among  other  potential   wireless  product
developments,  the ability to develop materials handling products that will have
wireless tracking  capability.  Design work commenced on initial wireless Pallet
prototypes  during the first quarter of 2001. The Company  believes that initial
Pallet  designs  that  incorporate  wireless  tracking  capabilities  will prove
marketable  to  many  prospective   customers.   Company  plans  for  additional
development of this wireless Pallet technology are scheduled for late 2002.

     License Agreement with TCD

     The Company announced,  on December 1, 2000, that it had completed a letter
of  intent  with  TCD to  enter  into an  arrangement  to  manufacture  products
utilizing  TCD's  TPF  Process.  The  Company,  through  ECC,  its  wholly-owned
subsidiary,  and TCD completed a license agreement on March 30, 2001 pursuant to
which the Company's  proprietary Pallet and other products it intends to develop
will be manufactured using the TPF Process.  The license agreement provided that
the Company  would make a payment in the amount of four hundred  fifty  thousand
dollars  ($450,000)  to TCD. This payment would be in addition to a deposit held
on the Company's  account by TCD in the amount of seventy-five  thousand dollars
($75,000).  This  deposit  was to be applied to the  license  fee payable to TCD
during June 2001. As required by the license  agreement,  the Company  completed
all license payments to TCD during September 2001.


                                       28
<PAGE>

     The Company and ECC also entered into a merger  agreement  with TCD,  which
provides  that  TCD  will  merge  with  ECC if  Envirokare's  shares  trade at a
specified  level during the thirty (30) month  period  following  the  agreement
date. In the event that the Company's  shares have not traded at such  specified
level by the end of the thirty (30) month period,  then ECC and the Company have
the option to effect the merger of TCD with ECC by paying to TCD's  shareholders
additional consideration, either in cash or additional shares of Envirokare.

     Anticipated Revenue Sources; Marketing and Distribution

     The Company  plans to generate  revenues  from  entering  into national and
international  licensing  agreements that would provide for royalty  payments in
connection  with  the  manufacture  and  production  of  the  Pallet  and  other
contemplated products by third parties.  License fees and royalty revenues would
be based on  units of  production.  As  opportunities  present  themselves,  the
Company  will also  consider  developing  and  operating  its own  manufacturing
facilities in conjunction with TCD's production facility development assistance.

     The Company had originally  planned to have licensees  begin  producing the
Pallet  during  2000 but  decided to conduct  additional  product  tests,  which
delayed a  previously  planned  production  start date.  Significantly  improved
substrate  technology  developments  caused the Company to rethink its  business
plan,  including  the method of  marketing  the Pallet  and  initial  production
start-up  dates.  The Company now expects that Pallet  production  will commence
sometime in late 2002.

     In December  1999,  the Company  announced that it had received a letter of
intent from Cultech  International  Corporation  to  manufacture  and market the
Pallet in Asia. Cultech intends to obtain exclusive  manufacturing and marketing
rights to the Pallet for all of Asia. The parties agreed in principle that, once
engineering studies are satisfactorily  completed,  the parties would enter into
an  agreement  whereby  Cultech  would make  payments to the  Company  including
licensing  fees and  royalty  payments  based on  units  of  Pallet  production,
although  the letter of intent does not  obligate the Company to enter into such
an agreement.  To date,  the Company has taken no further action with respect to
the letter of intent.

     Also in March 2000, the Company announced that it had received a production
and marketing  letter of intent from  International  Pallets of California.  The
letter of intent  provides for the parties to  negotiate  an  agreement  whereby
International  Pallets,  would  build a  production  facility  that would  allow
International  Pallets to produce,  market and sell the Pallet in California and
Nevada,  although the letter does not obligate the Company to enter into such an
agreement.  In the event a formal agreement was negotiated  between the parties,
the agreement would include  provisions  providing for International  Pallets to


                                       29
<PAGE>

pay a license fee and royalty payments to the Company.  To date, the Company has
taken no further action with respect to the letter of intent.

     Employees

     The  Company's  current  policy is to utilize  consultants  for  marketing,
accounting and engineering  services on an as-needed basis and these consultants
accommodate  the  Company's  current  needs  in  handling  all  aspects  of  its
operations.  Accordingly, the Company has no employees at this time. The Company
currently   retains   three   consultants   in  the  areas  of   marketing   and
administration.  Contracts  are  entered  into  as  required,  with  respect  to
consultants who provide  engineering and technical  support for Company products
in development.


                                       30
<PAGE>

                           PART II -OTHER INFORMATION

Item 1. Legal Proceedings

     Reference is made to the Company's Annual Report on Form 10-KSB for the
year ended December 31, 2001 (the "2001 Annual Report"), for a discussion of an
action filed by Mr. Real Morel against the Company in the Supreme Court of
British Columbia, Canada, which discussion is incorporated herein by reference.
The status of this matter has not changed since information incorporated by
reference to the 2001 Annual Report.

Item 2. Changes in Securities

     The Company is currently undertaking a private placement of units priced at
$0.10 per unit,  each unit  consisting of one (1) share of the Company's  common
stock and a warrant to purchase one (1) share of the Company's  common stock, at
an  exercise  price of $0.25 per share,  exercisable  for two (2) years from the
date of  subscription.  To date, the Company has raised fifty  thousand  dollars
($50,000) in this offering.

Item 3. Defaults Upon Senior Securities

     None

Item 4. Submission of Matters to a Vote of Security Holders

     None

Item 5. Other Information

     None


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<PAGE>

Item 6. Exhibits and Reports on Form 8-K

     (a)       Exhibits
               --------

     3.1       Company's Articles of Incorporation,  as amended October 12, 1999
               (incorporated herein by reference to Exhibit 3.1 to the Company's
               Annual  Report on Form  10-KSB  for the year ended  December  31,
               1999, filed with the Commission on April 7, 2000).

     3.2       Company's  By-laws as amended  and  restated  December  11,  2000
               (incorporated herein by reference to Exhibit 3.2 to the Company's
               Annual  Report on Form  10-KSB  for the year ended  December  31,
               2000, filed with the Commission on April 16, 2001).

     10.1      Merger  Agreement,  dated as of December 1, 2000 by and among the
               Company,  Electroship Acquisition Corp., Electroship (N.Y.) Inc.,
               Electroship  Partners,  John Gremmo,  John A. Notarianni,  Leo J.
               Mangan,  Raymond Anthony Joao and Richard Reichler  (incorporated
               herein by reference to Exhibit (c) 1. to the Company's  Report on
               Form 8K, filed with the Commission on January 3, 2001).

     10.2      Assignment of Patent  Application  from  Electroship  Partners to
               Electroship   (N.Y.)  Inc.  and  Defined  Field  of  Use  License
               Agreement  between  Electroship  Partners and Electroship  (N.Y.)
               Inc.  dated as of  September  20,  2000  (incorporated  herein by
               reference to Exhibit (c) 2. to the  Company's  Report on Form 8K,
               filed with the Commission on January 3, 2001).

     10.3      License   Agreement  between   Envirokare   Composite  Corp.  and
               Thermoplastic  Composite  Designs,  Inc.  dated  March  30,  2001
               (incorporated   herein  by  reference  to  Exhibit  10.3  to  the
               Company's  Annual  Report  on  Form  10-KSB  for the  year  ended
               December 31, 2000, filed with the Commission on April 16, 2001).

     10.4      Merger Agreement by and among the Company,  Envirokare  Composite
               Corp.,  Thermoplastic Composite Designs, Inc., Dale Polk, Sr. and
               Dale Polk,  Jr.,  dated  March 30, 2001  (incorporated  herein by
               reference to Exhibit 10.4 to the Company's  Annual Report on Form
               10-KSB  for the year  ended  December  31,  2000,  filed with the
               Commission on April 16, 2001).

     10.5      Employment Agreement between Envirokare Tech, Inc. and Charles H.


                                       32
<PAGE>

               Stein dated,  December 18, 2000 (incorporated herein by reference
               to Exhibit 10.5 to the Company's  Quarterly Report on Form 10-QSB
               for the period ended March 31, 2001, filed with the Commission on
               June 15, 2001).

     10.6      Employment  Agreement  between  Envirokare Tech, Inc. and Mark L.
               Kallan dated, December 18, 2000 (incorporated herein by reference
               to Exhibit 10.6 to the Company's  Quarterly Report on Form 10-QSB
               for the period ended March 31, 2001, filed with the Commission on
               June 15, 2001).

     10.7      Employment  Agreement  between  Envirokare  Tech, Inc. and Gerald
               Breslauer  dated,  December  18,  2000  (incorporated  herein  by
               reference to Exhibit 10.7 to the  Company's  Quarterly  Report on
               Form 10-QSB for the period ended March 31,  2001,  filed with the
               Commission on June 15, 2001).

     10.8      Amendment to Employment  Agreements  between the Company and each
               of Charles H. Stein,  Mark Kallan,  and Gerald  Breslauer,  dated
               March 14, 2001 (incorporated  herein by reference to Exhibit 10.8
               to the Company's  Quarterly  Report on Form 10-QSB for the period
               ended  March 31,  2001,  filed  with the  Commission  on June 15,
               2001).

     10.9      Letter of  Agreement  between  the  Company and Charles H. Stein,
               dated May 8, 2001  (incorporated  herein by  reference to Exhibit
               10.9 to the  Company's  Quarterly  Report on Form  10-QSB for the
               period ended March 31, 2001,  filed with the  Commission  on June
               15, 2001).

     10.10     Agreement and General Release between  Envirokare  Tech, Inc. and
               Charles H. Stein dated November 27, 2001 (incorporated  herein by
               reference to Exhibit 10.10 to the Company's Annual Report on Form
               10-KSB  for the year  ended  December  31,  2001,  filed with the
               Commission on March 28, 2002).

     (b)       Reports on Form 8-K

               None


                                       33
<PAGE>

                                    SIGNATURE

     In accordance  with Section 13 or 15(d) of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned,  thereunto
duly authorized, on May 6, 2002.

                                    ENVIROKARE TECH, INC.
                                    Registrant


                                    By: /S/ STEVE PAPPAS
                                       -----------------------------------------
                                       Name: Steve Pappas
                                             Title: President
                                             (Principal Executive Officer and
                                             Principal Financial and Accounting
                                             Officer)


                                       34